Mapletree North Asia Commercial Trust posts fiscal 1H net property income rose 16 percent

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Mapletree North Asia Commercial Trust reported Thursday its fiscal first half net property income increased 15.8 percent on-year to S$161.88 million on lower rental relief to retail tenants as footfall and retail sales at Festival Walk mall grew, and on contributions from acquisitions in Japan and South Korea.

Gross revenue for the April-to-September period rose 13.3 percent on-year to S$215.44 million, the trust said in a filing to SGX.

The distribution per unit (DPU) came in at 3.426 Singapore cents for the six-month period, up 19.1 percent on-year from 2.876 Singapore cents, MNACT said. The payment date is expected to be 24 December.

The trust said it had rental relief to tenants of S$4.7 million in the fiscal first half, compared with S$34.9 million in the year-ago period.

The Hewlett Packard Japan Headquarters Building, acquired in June, and the Pinnacle Gangnam, acquired in October 2020, also contributed, the trust said. MNACT noted the contribution from Pinnacle Gangnam isn’t included in gross revenue and net property income as the trust will share profit after tax based on its 50 percent interest.

Cindy Chow, CEO of the trust’s manager, Mapletree North Asia Commercial Trust Management, pointed to improvement at Festival Walk amid a stable Covid-19 situation in Hong Kong as bolstering DPU growth.

“The recent gradual improvement in the retail market has been encouraging, though we remain cautious about the risks of resurgence of the Delta or other virus variants that may affect the pace of market recovery. We will continue to support our tenants through rolling out exciting marketing and promotion programmes and other initiatives in consultation with our tenants, to boost sales,” she said in the statement.

“We have continued to maintain a high portfolio occupancy rate, which was close to 98 percent at the end of September 2021. In conjunction with active and prudent capital management, we will continue to drive the performance of our portfolio of quality assets and source for yield accretive acquisitions to achieve greater diversification and growth,” Chow added.

However, rental reversion at Festival Walk was an average of negative 30 percent across 35 retail leases, while Gateway Plaza posted average rental reversion of negative 24 percent across 13 office leases, the trust said. While the Pinnacle Gangnam posted positive rental reversion of 58 percent, that was on one lease.

Outlook

The trust issued a cautious outlook, saying recovery was likely to be uneven across different markets, with concerns over the spread of the Delta variant of Covid-19 and supply chain disruptions, higher inflation and rising interest rates.

For Festival Walk, the improved sales performance hasn’t led to leasing demand on a meaningful scale, the trust said, adding a turn around would be dependent on removing border restrictions. Average renewal or re-let rental rates at the mall are expected to be lower on-year, the trust said.

“Most retailers have remained conservative and cautious on committing to long-term leases. As a result, demand in major shopping districts remain predominantly driven by short-term leases and pop-up stores,” MNACT said. “Maintaining a high occupancy rate remains an ongoing focus, while being agile and adaptable are key to navigating through the market changes.”

MNACT said repair of the interior damage to Festival Walk due to protests in Hong Kong in 2019 has been completed, while exterior work is expected to be completed by end-2021. Insurance claims for the property damage and revenue loss from business disruption are being finalised, the trust said.

Mapletree North Asia Commercial Trust’s portfolio has 13 properties across China, Hong Kong, Japan and South Korea, with total assets under management of S$8.4 billion, including the 50 percent interest in Pinnacle Gangam.